A number of retail forex traders increasingly believe that an excellent way to test out the services provided by an online forex broker involves opening a micro account with the broker, with initial deposits that can go as low as $25. Nevertheless, most reputable online forex brokers require that initial account deposits be more in the $100-$500 range for their micro accounts. This greater amount can provide some additional execution capability in case a trader’s first few deals are not very successful.
Such micro forex trading accounts can be an excellent opportunity for both new and experienced forex traders alike to get some real practice trading online via the chosen forex broker to see if everything meets acceptable standards. Find more usable tips for choosing the right forex broker for you.
While some newer traders might prefer to open demo accounts, especially since no money is involved, this lack of funds is exactly why micro accounts have become a preferred means of testing forex brokers for many more seasoned traders. Basically, you really want to know how a forex broker will react and treat you once it has some of your money and how difficult it will be to get it back when you entrust it to them.
Some of the primary advantages of opening micro forex broker accounts are discussed further in the sections below. First you can read about all different kinds of live accounts that are offered by the broker.
A Great Way to Try Out a Forex Broker
Perhaps one of the best ways to test the services of a forex broker, when it comes to managing your money and executing real forex deals and orders, is to open a micro account. Demo accounts can also be helpful in this regard, especially if you are suspicious about a particular broker that does not offer micro accounts.
Once you have narrowed down your forex broker choices and decided to open up a forex micro account with a particular broker, you will then want to systematically test each of their services that you will want to use.
Make sure to review the broker for legitimacy, to see that everything works as they have represented to you, and that their services meet the standards you require. For example you can test the following:
- What the quality and responsiveness of the broker’s customer service department is really like, once you actually have money on deposit with them.
- How the broker executes forex deals and how tight their spreads are in practice.
- How well the broker manages real orders, especially with respect to slippage on stop loss orders in fast markets and the execution of take profit orders placed at levels that barely trade before a reversal occurs.
- How easy executing forex trades and generally using the trading platform(s) provided by the broker is.
- Whether the analytic capabilities and indicators offered by the broker are sufficiently sophisticated for your forex trading needs.
- What sort of proprietary market news and educational information is available and its quality.
- How easy sending and withdrawing money from your forex broker account is.
- Whether any fees are charged by the broker that you might not have been previously aware of.
- Whether the forex broker’s account management capabilities are satisfactory.
- What the broker’s rollover policy and pricing is.
- How the broker manages margin calls or automatic margin stops on losing positions.
Trading Genuine Money is Far More Realistic
Not only can a trader open a micro account to try out a new forex broker, but they can also practice trading in a far more realistic environment than they can in a demo or practice trading account.
Basically, since micro account trading involves placing real money at risk, albeit in rather small amounts with minimums being on the order of 1/10 of that put at risk in standard retail forex trading amounts. Nevertheless, by taking real risks, this often induces some of the important emotional reactions involving how people feel and act when making and losing sums of their own money.
New forex traders need to master these reactions and incorporate that information in their trading plans to minimize any negative impact. Accordingly, using a micro account means that these emotional responses and their impact can be observed and corrected for before placing larger amounts at risk.
The Benefits of Trading Smaller Lot Sizes
Often, traders who open micro accounts with a forex broker will be permitted to trade in smaller lot sizes on the order of $10,000 per lot. This can allow them to fine tune their position sizing considerably when it comes to money management. It can also permit traders to take lower risks per trade that can be especially advantageous during very volatile periods, like during and shortly after important economic data releases.
Usually traders can choose to upgrade their forex brokerage account to a standard or V.I.P. trading account by depositing additional funds. Nevertheless, this often means they will then need to trade in normal lot sizes which tend to be more in the $100,000 per lot range and so might end up losing the benefits of trading in these smaller lot sizes.
This concludes our article series on forex broker tips.
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